How Fast Are Prices in Japan Falling?
The consumer price inﬂation rate in Japan has been below zero since the mid-1990s. However, despite the presence of a substantial output gap, the rate of deﬂation has been much smaller than that observed in the United States during the Great Depression. Given this, doubts have been raised regarding the accuracy of Japan’s oﬃcial inﬂation estimates. Against this background, the purpose of this paper is to investigate to what extent estimates of the inﬂation rate depend on the methodology adopted. Our speciﬁc focus is on how inﬂation estimates depend on the method of outlet, product, and price sampling employed. For the analysis, we use daily scanner data on prices and quantities for all products sold at about 200 supermarkets over the last ten years. We regard this dataset as the “universe” and send out (virtual) price collectors to conduct sampling following more than sixty diﬀerent sampling rules. We ﬁnd that the oﬃcially released outcome can be reproduced when employing a sampling rule similar to the one adopted by the Statistics Bureau. However, we obtain numbers quite diﬀerent from the oﬃcial ones when we employ diﬀerent rules. The largest rate of deﬂation we ﬁnd using a particular rule is about 1 percent per year, which is twice as large as the oﬃcial number, suggesting the presence of substantial upward-bias in the oﬃcial inﬂation rate. Nonetheless, our results show that the rate of deﬂation over the last decade is still small relative to that in the United States during the Great Depression, indicating that Japan’s deﬂation is moderate.
|Date of creation:||May 2012|
|Date of revision:||Oct 2012|
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- Magnus Blomström & Jennifer Corbett & Fumio Hayashi & Anil Kashyap, 2003. "Structural Impediments to Growth in Japan," NBER Books, National Bureau of Economic Research, Inc, number blom03-1.
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